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How to transfer LTD business to a related company

How to transfer LTD business to a related company

I have a client, John, who owns 100 % in Company A. He also owns 50% of Company B with a colleague Andy (50%)

Over the last few years the distinction between customers of Company A and B has become blurred and John would now like to tidy things up by closing Company A and selling the trade an assets to Company B.

Is this as simple as Company B raising capital from it's shareholders (i'm thinking EIS qualification) and purchasing the goodwill and assets from Company A at agreed valuation?

Many thanks  



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By JimFerd
29th Feb 2016 16:37

I don't know much about EIS, so please don't take this as gospel - but I expect the main problem would be that the investment wont qualify as they each own more than a 30% stake. There are probably various other reasons too.

In terms of the transfer itself, it's just a case of transferring it over under the connected company rules - that or buying the shares and operating it as a subsidiary (which I expect would be a nuisance and not have the intended result).

It gets slightly complicated in that you can't just use 'agreed valuations' where connected companies are concerned. Market values etc have to be used, and there are certain elections and reliefs that are available.

Thanks (1)
29th Feb 2016 17:23

Agreed values
I think Jim forgot to insert "for tax purposes".

The point being that the actual transfer can be at whatever values the two parties agree. It's only for the purposes of calculating the tax consequences that market value, if different, may need to be substituted - not for the actual transaction itself.

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